Happy New Year!
We wanted to let you know about developments nationally that will affect the charitable sector. In late December, legislation was signed into law that will provide $1.4 trillion to fund the U.S. government through September 2020. Included in that legislation are two tax provisions that affect private foundations and nonprofits.
Simplification of the Private Foundation Excise Tax
The simplification of the Private Foundation Excise Tax (Section 206) replaces the two-tier excise tax that private foundations pay on investment income with a flat-rate excise tax rate of 1.39%. A flat rate has long been a priority for private foundations, as the two-tier rate penalized foundations for making larger grants in one year to assist with emergencies such as an economic downturn or for disaster relief. The new rate is effective starting in 2020.
Repeal of the Unrelated Business Income Tax
The legislation (Section 302) retroactively repeals the provision of the 2017 Tax Cut and Jobs Act, the Unrelated Business Income Tax (UBIT) on transportation benefits that nonprofits provided their employees. The provision had changed the way UBIT was applied resulting in a 21% tax on parking and transportation benefits offered to employees of charities. Nonprofits who have already paid the tax may receive a refund.
We look forward to bringing you policy news of concern to our sector in the coming year. Please feel free to reach out to us if you have any questions.